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DH

DIAMOND HILL INVESTMENT GROUP INC (DHIL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $36.0M, down slightly year over year (−2%) and sequentially (−3% vs Q1); GAAP diluted EPS rose to $5.73 driven by strong investment income, while adjusted diluted EPS was $2.86, essentially flat YoY .
  • Net operating profit margin compressed to 22% (from 35% in Q1 and 33% YoY), reflecting higher operating expenses and deferred compensation effects; adjusted operating margin was 30% vs 31% YoY .
  • Net client outflows of $644M were concentrated in equities (−$896M) and partly offset by fixed income inflows (+$252M); total AUM+AUA ended at $31.9B, up from $31.6B in Q1 on market appreciation .
  • Board declared a $1.50 dividend payable Sep 12, 2025; company also launched the Diamond Hill Securitized Total Return Fund on Jul 1, 2025, expanding fixed income capabilities .

What Went Well and What Went Wrong

What Went Well

  • Strong investment income of $14.6M (vs a $0.7M loss YoY and $1.1M in Q1) materially boosted GAAP EPS to $5.73; adjusted EPS remained resilient at $2.86 .
  • Management advanced product breadth, launching the Diamond Hill Securitized Total Return Fund on Jul 1; CEO emphasized disciplined capital allocation and execution: “We remain focused on building lasting value through consistent execution, disciplined capital allocation, and continued investment in areas of competitive strength” .
  • Continued capital return: $12.3M returned via $8.3M buybacks (59,763 shares) and $4.0M dividends during the quarter; regular quarterly dividend maintained at $1.50 per share with payment date set .

What Went Wrong

  • Net client outflows of $644M versus $229M inflows in Q2 2024, driven by equity outflows (−$896M) across vehicles; separately managed accounts (−$273M) and collective investment trusts (−$256M) were notable drags .
  • Net operating profit margin fell to 22% (from 35% in Q1 and 33% YoY) as total operating expenses rose 15% YoY to $28.3M and deferred compensation expense flipped to a $3.0M expense from a benefit last year .
  • Revenue pressure persisted: $36.0M vs $36.7M YoY and $37.1M in Q1, reflecting the drag from net outflows despite market appreciation supporting AUM .

Financial Results

Sequential Trend (Q4 2024 → Q1 2025 → Q2 2025)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD)$39,121,000 $37,116,210 $36,025,931
GAAP Diluted EPS ($)$2.73 $3.77 $5.73
Adjusted Diluted EPS ($)N/A$3.23 $2.86
Net Operating Profit Margin (%)N/A35% 22%
Net Operating Income ($USD)$13,239,000 $13,063,899 $7,765,064
Investment Income (Loss), net ($USD)$(3,261,000) $1,119,969 $14,554,685
Total Operating Expenses ($USD)$25,882,000 $24,052,311 $28,260,867

Year-over-Year (Q2 2024 → Q2 2025)

MetricQ2 2024Q2 2025
Revenue ($USD)$36,661,333 $36,025,931
GAAP Diluted EPS ($)$2.93 $5.73
Adjusted Diluted EPS ($)$2.88 $2.86
Net Operating Profit Margin (%)33% 22%
Adjusted Net Operating Profit Margin (%)31% 30%
Investment Income (Loss), net ($USD)$(654,591) $14,554,685
Net Income to Common ($USD)$8,125,840 $15,570,577

Segment/Flow Breakdown

Vehicle Net Flows ($MM)Q1 2025Q2 2025
Proprietary Funds+386 −146
Separately Managed Accounts−450 −273
Collective Investment Trusts−303 −256
Other Pooled Vehicles−162 +31
Total Net Client Flows−529 −644
Asset Class Net Flows ($MM)Q1 2025Q2 2025
Equity−1,289 −896
Fixed Income+760 +252
Total Net Client Flows−529 −644

KPIs

KPIQ1 2025Q2 2025
AUM at Beginning of Period ($MM)$30,012 $29,792
Net Client Flows ($MM)−529 −644
Net Market Appreciation/Income ($MM)+309 +923
AUM End of Period ($MM)$29,792 $30,071
AUA End of Period ($MM)$1,804 $1,788
Total AUM + AUA End ($MM)$31,596 $31,859
Total Avg AUM + AUA ($MM)$32,265 $30,974
Weighted Avg Shares Diluted2,748,568 2,719,610
Capital Returned ($USD)$7.8M (buybacks $3.6M; dividends $4.2M) $12.3M (buybacks $8.3M; dividends $4.0M)

Non-GAAP Adjustments (Q2 2025)

  • Adjusted EPS excludes: deferred comp liability effects (−$3,042k), Consolidated Funds (net −$368k to net income), and other investment income (−$7,412k), resulting in adjusted diluted EPS $2.86 and adjusted net operating margin 30% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ3 2025$1.50 per share (regular) $1.50 per share; payable Sep 12, 2025; record Aug 29, 2025 Maintained
Revenue/Margins/OpEx/TaxFY/Q3No formal guidance providedNo formal guidance providedMaintained (no formal guidance)
Product Launch (Fixed Income)Effective Jul 1, 2025N/ADiamond Hill Securitized Total Return Fund launched Strategic addition

Earnings Call Themes & Trends

Note: A Q2 2025 earnings call transcript was not available; themes are inferred from management press releases and risk disclosures.

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Macro/Market VolatilityYear highlighted mixed investment income and improving adjusted margin (32%) “Uncertain economic and market environment” impacting near-term returns “Steep market volatility… created opportunities” for long-term discipline Stable awareness; constructive tone
Equity vs Fixed Income MixFY 2024: fixed income AUM $6.2B, equity outflows Fixed income strategies surpassed $7B AUM; equity outflows persisted Equity outflows continued; fixed income inflows +$252M; launched securitized strategy Fixed income strengthening
Capital Allocation$46.8M returned in 2024 (buybacks/dividends) $7.8M returned in Q1 2025 $12.3M returned in Q2 2025; dividend maintained Continued return; consistent
Technology/AIAI cited as operational risk factor AI adoption cited as a risk AI integration remains a listed risk in forward-looking statements Monitoring; no specific initiatives disclosed
Regulatory/LegalStandard regulatory risks noted Continued standard risks Continued standard risks Stable

Management Commentary

  • CEO Heather Brilliant: “Steep market volatility at the start of the quarter created opportunities for investors with a long-term discipline like ours… we are excited to launch our new fixed income strategy, the Diamond Hill Securitized Total Return Fund” .
  • Capital return stance reaffirmed via buybacks and dividends; regular quarterly dividend declared at $1.50 per share with firm payment/record dates .
  • Non-GAAP framework reiterated to isolate deferred compensation market effects, impacts from consolidated funds, and other investment income to better reflect core operations .

Q&A Highlights

  • Earnings call transcript for Q2 2025 was not available; no Q&A themes or clarifications to report [List/Search yielded none].

Estimates Context

  • Wall Street consensus for Q2 2025 EPS and revenue (S&P Global) was unavailable; the S&P Global feed returned actuals only for revenue and no consensus series for EPS or revenue estimates for this quarter. Values retrieved from S&P Global*.
  • Implications: Without formal consensus, post-earnings adjustments will hinge on investor interpretation of the strong investment income vs ongoing equity outflows and margin compression in GAAP results .

Key Takeaways for Investors

  • Investment income volatility was the key swing factor, converting a prior-year investment loss into a sizable gain that lifted GAAP EPS; adjusted EPS held steady, indicating core operations were stable after normalizing for non-operating items .
  • Equity net outflows accelerated sequentially and YoY, while fixed income continued to attract inflows; the new securitized fixed income strategy should support the firm’s fixed income growth vector .
  • Operating expenses rose and deferred comp expense turned positive vs a benefit in Q2 2024, compressing GAAP operating margins; investors should watch expense discipline and deferred comp sensitivity going forward .
  • AUM/AUA ended at $31.9B, up sequentially due to market appreciation despite outflows; market beta will remain an important driver of topline given fee-based revenues .
  • Capital returns remain a core element of the equity story (buybacks and $1.50 dividend maintained), potentially providing downside support to the share price in volatile markets .
  • Near-term focus: monitor equity flow trends, the adoption and performance of the new securitized fund, and the path of investment income; margin normalization as deferred comp and fund consolidation effects vary quarter-to-quarter .
  • Without Street consensus, trading setups will lean on intra-day price reactions and flow disclosures; longer term, mix shift to fixed income plus disciplined capital return underpin the thesis, while equity flows are the key risk to revenue trajectory .

*Values retrieved from S&P Global.